SBI, HDFC and ICICI in RBI's 2024 list of systemically important banks

The Reserve Bank of India (RBI) on Wednesday announced that the State Bank of India (SBI), HDFC Bank, and ICICI Bank continues to be on the list of Domestic Systemically Important Banks (D-SIBs) in 2024. This classification means these banks must maintain higher capital reserves than others to withstand potential economic shocks.

The D-SIB classification, introduced in 2014 and updated in 2023, places additional regulatory requirements on banks whose failure could have a significant impact on the wider financial system. The RBI evaluates the systemic importance of banks based on several factors, including their size, complexity, and interconnectedness.

The RBI determines a cut-off score beyond which banks qualify as D-SIBs. Banks are classified into one of four buckets and each bucket corresponds to an additional Common Equity Tier 1 (CET1) capital requirement, ranging from 0.20% to 0.80% of risk-weighted assets (RWAs), depending on their level of systemic risk.

The higher the score, the larger the required capital buffer.

Currently, SBI is placed in bucket 4, with an additional CET1 requirement of 0.80%, while HDFC Bank and ICICI Bank are in buckets 2 and 1, requiring 0.40% and 0.20% CET1 capital, respectively.

The D-SIB list was first released in 2015, with SBI and ICICI Bank as the original entrants. HDFC Bank was added in 2017.

This year’s classification is based on data submitted by banks as of March 31, 2024.

The RBI's methodology for assessing systemic importance was refined in 2023 to include changes in the substitutability and interconnectedness indicators. For example, the ‘Payments’ sub-indicator now accounts for both the value (75% weightage) and volume (25% weightage) of digital payments instead of only Real Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT) transactions.